Gravity,

Does that means you admit that you work for Swisscash??

Dreamer

I had received mine and plus a few other people received theirs too.

Dreamer

This post has been edited by dreamer101: Apr 7 2006, 11:42 AM

Hi,

You miss one more thing that you can do. Pay off you car loan. Car loan is around 4% simple interest. Which means it is actually around 6% compounded. Saving 6% in interest is as good as earning 6% on your investment.

Dreamer

Yes and no. The first priority is to have an emergency fund. Make sure that you have enough money to cover 3 to 6 months of your living expenses. Then, after that, you can talk about investing.

Dreamer

Geminist and ah_suknat,

I do not think you can do FD on line. That option is only available to old allied bank customer that got merged into Maybank. I had called and tried to do FD online with Maybank2u and they told me it is not possible.

Dreamer

Geminist,

I tried that one years ago. Does that mean it is possible now?? What menu option did you used??

Dreamer

The interest rate is annual (aka yearly ) interest rate. So, at the end of 6 months, you get your money plus (3.5% * 6/12) -> 12 months in a year = 1.75%

No, you do not get interest every month.


Dreamer

This post has been edited by dreamer101: Aug 11 2006, 08:15 PM

No. Each FD is fixed and individual contract.

Dreamer

Geminist,

Do you have to be physically at Maybank to cash out the FD or you can choose to get the FD deposited into you A/C??

Dreamer

1 year FD give you the best rate in Malaysia..

Dreamer

This post has been edited by dreamer101: Aug 12 2006, 01:15 AM

Yes. In fact, you should open multiple FD within reasons. The reason is if something happen and you need the money, you just need to cash out just enough FD to get by.

For example, if you have 10K, you can do 1 X 10K FD or 2 X 5K FD. If you do 2 X 5K FD and you need the money before maturity, you just need to cash out 1 X 5K FD and suffer only penalty for 1 5K FD.

Some people believe in laddering too. Especially, if you believe interest rate is going up. In laddering, you do one FD every month or every X months, 1 year maturity and auto-renewal. So, if you need money, there is always a FD close by to cash out. Plus, your FD will catch the rising interest rate.

Dreamer

Your 6 month FD's answer is correct. But, your formula is wrong!!!

The interest should be 0.035 ( 3.5% ) * 6/12 = 0.0175

10K * 0.0175 = 175

You 1 month FD calculation is wrong due to compounding interest. You get interest on top of your interest after every month.

The interest should be ( 1 + 0.031 * 1/12) ^ 6 - 1= 0.0156

10K * 0.0156 = 156

As it should be. You should get pay more interest for having a longer term contract.

By the way, you should be doing one year FD. It has the best rate at 3.88%. You just buy 1 year FD every months. The minimum is 1k.


Dreamer

This post has been edited by dreamer101: Aug 12 2006, 08:15 AM

1) 6 months FD. After 6 months, you get $10,000 + $175 = $10,175

2) 1 Month FD. After 6 months, you get $10,000 + $156 = $10,156

We teach this in standard 6 of Chinese primary school.

Dreamer

Hi Folks,

Let's make something very clear here. I am assuming you are putting money into FD for 6 months.

Case (A) -> you are putting money into 6 months FD

Case (B) -> You are putting money into 1 month FD and you are doing auto-renewal. Your 1 month FD roll into a new 1 month FD every month automatically with the interest. You are taking the money out after 6 months to make a fair comparison. I am ignoring the number of days in a month to make a simpler comparison.


Now, I will calculate very slowly.
At time 0, you have $10,000.
Atfer month 1, you have interest of 0.031/12 = 0.0258
With 10,000, you earn 10,000 * 0.0258 = $25.80

After month 1, you have $10,025.80. Now, you auto-renew into a new 1 month FD at 3.1% again. Your principal is at $10,025.80 now

After month 2, you earn interest of

$10,025.80 * 0.0258 = $25.87

After month 2, you have $10,025.80 + $25.87 = $10,051.67
And so on...

Let's call the principal as P
Annual interest rate as I
Number of months as N

The formula for amount after N months with one month FD is

P * ( 1 + I / N ) ^ N

Dreamer

This post has been edited by dreamer101: Aug 12 2006, 10:32 AM

You are not even using the same amount of principal (60K versus 10K) for comparison..


Dreamer

This post has been edited by dreamer101: Aug 12 2006, 10:36 AM

Lowyat82,

Anybody that read a bit more about personal finance will not make that kind of sweeping statement. The smartest statement that anyone can make is "it depends".

For examples, there are at least 3 buckets of money

1) Money that you use for normal expense. You keep this in a checking account

2) Your emergency fund. Money for 3 to 6 months of expenses. Some times, you may even keep 12 months or more if you think a recession is coming. This bucket of money are put in a safe place and earn a bit of interest like FD

3) Money for long term investment

Normally, you need to have (2) before you start thinking about (3). And, (3) is where you may put money into unit trusts and etc..

I know I am not smart enough to play in Malaysia stock market. So, the only risky invetsment that I do in Malaysia is one banking stock that I can trust. It pays dividend much higher than FD. But, I have money in (1) and (2) so I can take the risk.

Dreamer

This post has been edited by dreamer101: Aug 12 2006, 11:41 AM

Lowyat82,

The inflation > interest thing is a bunch of BS anyhow. Inflation is measured as per a normal average human being.

1) Nobody is a normal average human being. So, if you are frugal, inflation may affect you less than other people. If you pay off your car and house, it will affect you even less.

2) You have to think like "Rich Dad, Poor Dad". It is all about cash flow.

Let's say you spend $30K per year. If your salary plus investment income is $36K, you have 6K extra to invest every year. If you put the money into FD, it will generate more cash flow for you. If you keep this up, your cash flow will grow and eventually you will be well off. There are people that I know that they only save money, buy house and FD. They are doing fine too.

As long as your cash flow is positive and you invest your excess cash flow for asset ( things that generate cash flow as per RDPD), you will be fine in the long run. You might be slow but you are steady.

I am not saying whether you should or should not buy Malaysian unit trust. I am saying I know that I am not smart enough to invest in Malaysian unit trust. It is not right for me.

Dreamer

This post has been edited by dreamer101: Aug 12 2006, 01:11 PM

1) Yes, banking stock = share aka own the bank.

2) You can get the chinese version of the book very cheap.

Dreamer

1) As I had said, I have only trust in one bank. The one that is most well managed.

2) This is my basic logic for investing in bank.

A) Bank is guaranteed to make money in Malaysia. Due to lack of competition and regulation, the margin ( the difference between FD and loan rate) is very high ( 3% to 4%). So, if the bank is well managed, it will make a lot of money.

B) Even if we hit a recession, the government will not let the bank failed. A well managed bank will handle recession much better than others.

C) This particular bank stock pays good dividend. So, I am getting good cash flow. I do not have to sell the stock in order to make money. It does not really matter to me whether the stock is up or down since I will collect dividend every year.

D) Demographically, 67% of Malaysians is less than 35 years old. There is growth here.

E) Unfortunately, the new generation is not frugal and careful about finance. So, they will pay more money to bank in interest for credit card, Hire Purchase and housing loan. Bank will makes a lot of money from the new generation. I can offer advice but if people will not listen, I must as well profit from that.


Dreamer

This post has been edited by dreamer101: Aug 12 2006, 09:31 PM

To be precised, the possibility of capital gain. Until you SELL the stock, it is just a paper gain. The lot size and the price of the stock make the share in Malaysia very large ( a few Ks). Unless you have a lot of money, you cannot really sell teh stock a small amount at a time.

Dreamer